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Is partial privatization of universities a solution for higher education? A successive monopolies model

Rim Lahmandi-Ayed (), Hejer Lasram and Didier Laussel
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Hejer Lasram: UR MASE - Modélisation et Analyse Statistique et Economique - ESSAIT - Ecole Supérieure de la Statistique et de l'Analyse de l'Information - Université de Carthage - University of Carthage, Innov'com, Sup'com, University of Carthage Ariana, Tunis, Tunisia
Didier Laussel: AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper studies a model of vertical successive monopolies where students/workers buy qualication from an university then sell skilled labor to a monopolist who itself sells its nal product to consumers, linking this way for the rst time the education sector to the labor and output markets. The question is whether a public university should be partially or fully privatized. The partially privatized university xes the tuition fees in order to maximize a weighted sum of prots and social welfare. A larger share of the private sector means lower training costs but, at given training costs, higher margins and lower nal output levels. We prove that partial privatization of the university is optimal when public ineciency is not too severe and that the State keeps in this case a large majority of university's shares. When the ineciency parameter increases above some critical level, one switches discontinuously to full privatization. We show that these results are robust to the introduction of a feasibility constraint requiring university prots to be non-negative following privatization.

Keywords: Education; labor market; successive monopolies; vertical dierentiation; partial-privatized university; State regulation (search for similar items in EconPapers)
Date: 2021-12
New Economics Papers: this item is included in nep-dem and nep-reg
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Published in Journal of Public Economic Theory, Wiley, 2021, 23 (6), pp.1174-1198. ⟨10.1111/jpet.12531⟩

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DOI: 10.1111/jpet.12531

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